Failure to notify gas tariff…: Pakistan may face IMF wrath in next review

ISLAMABAD: Pakistan may face annoyance of the International Monetary Fund (IMF) in the next review under the $3 billion Stand-By Arrangement (SBA) loan over its failure to notify an increase in gas tariff, which was determined by the Oil and Gas Regulatory Authority (Ogra) on June 2, 2023.

The next review of the SBA loan of $3 billion for the next tranche of $1 billion is due in November and the government is left with no option but to increase the gas tariff by 45-50 per cent. Both the gas companies are facing a shortfall of Rs657.766 billion. The Fund may also take up this very issue any time with the government prior to the review meetings.

“The relevant authorities have sensitised caretaker federal minister for energy how imperative an increase in gas prices is. If the government does not take the required action in 40 days after the determination by Ogra, then the regulator must notify the required raise in gas price as per the law amended on the directives of IMF and World Bank. Now 83 days have elapsed since the determination by Ogra about an increase in gas prices by 45-50 per cent,” top officials of the Energy Ministry told The News.

The Petroleum Division tailored various scenarios for an increase in gas prices based on political damage control under which low-class consumers would be passed less increase and high-end consumers would be passed on the maximum increase to compensate for the low-end consumers. However, the former PDM [Pakistan Democratic Movement] government failed to take the decision to this effect and now the responsibility rests with the caretaker setup about an increase in gas tariff.

The Oil and Gas Regulatory Authority on June 2, 2023, announced an increase of 50 per cent (Rs415.11 per MMBTU) for consumers of the Sui Northern Gas Pipeline Limited (SNGPL) pushing the subscribed gas price up to Rs1238.68 per MMBTU. The regulator increased the gas price by 45pc (417.23 per MMBTU for the consumers of Sui Southern Gas Company Limited (SSGCL) for 2023-24.

The SNGPL still has the previous year’s accumulative shortfall of Rs560.378 billion up to FY23, while Sui Southern has a shortfall of Rs97.388 billion and this is how the existing shortfall of both the gas companies stands at Rs657.766 billion.

The IMF wants the government to carve a strategy to end oil and gas sector circular debt which stands at Rs1.7 trillion, out of which gas sector circular debt is at Rs1.3 trillion. The PDM government had submitted a plan to the IMF to manage the gas sector’s circular debt based on the dividends ploughing back schemes to reduce Rs543 billion without the consultation of OGDCL.

According to the plan, the federal government would inject around Rs414bn into the Sui Northern and Sui Southern gas companies through supplementary grants for payment of outstanding dues to gas producers, OGDCL, PPL and GHPL. Out of these funds, the SNGPL and the SSGCL would clear outstanding liabilities of about Rs225bn to the OGDCL, Rs62bn to the PPL and Rs127bn to the GHPL. On top of these, OGDCL and PPL would arrange about Rs56bn on their own and partially liquidate some of the investment bonds.

In return, the three gas producers would pay Rs475bn dividends to the federal government on their retained earnings, estimated to be around Rs1.44 trillion as of June 30, 2022. The government currently holds 100pc stakes in GHPL, 85pc in OGDCL and 75pc in PPL.